New rule tightens Rupert Murdoch's grip on News Corp companies

Rupert Murdoch will use News Corp's split to tighten his grip on the media
empire he founded, by introducing a new rule that makes it difficult for
other shareholders to build significant voting stakes in either of the new
companies.

News Corp, which will separate its highly profitable television and entertainment arm from its troubled newspaper and book publishing assets next month, set out plans for the new structure on Friday, ahead of a meeting with investors next week.

The plans also revealed that James Murdoch will sit on the board of both companies, and that Mr Murdoch expects to write down the value of the publishing business by between $1.2bn and $1.4bn this quarter, ahead of the split.

Once separated, the new companies - 21st Century Fox and News Corp resopectively - will be subject to a so-called "poison pill" clause, designed to prevent anyone from building a stake that could help them challenge Mr Murdoch's own.

The "shareholder rights plan" means that, if any new shareholder amasses 15pc or more of top-tier voting shares in either of the new companies, the existing shareholders will be entitled to bolster their own positions by buying additional shares at half price.

News Corp's dual-class share structure already affords Mr Murdoch disproportionate control of the business. His family owns around 7pc of the business, but most of its stock is in voting shares, confusingly dubbed class B, handing him around 40pc of the voting power.

The dual-class share structure has been heavily criticised by corporate governance campaigners and News Corp shareholders, but without enough class B shares to out-vote Mr Murdoch, they have not been able to force a change.

Shareholders are also likely to be angered by James' position as a director of both companies. Many of them feel his reputation has been too heavily tarnished by the News of the World phone hacking scandal and that he is now a drag on the business.

He will be joined on the boards of News Corp and 21st Century Fox by his brother Lachlan Murdoch. However, their sister Elisabeth, who opted to "delay" her ascension to the News Corp board at the height of the hacking scandal, will not join either company as a director.

Once News Corp splits, shareholders will receive one share in the new New Corp - the newspaper and publishing division - for every four shares in 21st Century Fox. The television and film operation generated around three quarters of News Corp's $33.4bn revenues last year, and 90pc of its profits.

Last month, it emerged that Mr Murdoch will also get a $3.7m pay rise after the company divides. His base pay will remain the same as last year, but his performance-related pay means he will be able to collect up to $28.3m a year. News Corp said in a filing with America's Securities and Exchange Commission (SEC) that the pay hike was "competitive and appropriate given Mr Murdoch's responsibilities associated with two separate public companies".